On Appeal from the Food Court: Must Consumer Class Action Plaintiffs be “Ascertainable”?

Over the past several years, WLF has advocated that trial court judges should deny certification of consumer class actions if the lead plaintiffs cannot offer an administratively feasible method for the court to determine who is a “member” of the class. This “ascertainability” issue has arisen in many food-labeling class actions in the Food Court (a/k/a the U.S. District Court for the Northern District of California) and in other federal districts. With the December, 2014 appeal of Judge Charles Breyer’s denial of certification in Jones v. ConAgra, the battle over ascertainability has finally moved from the Food Court to the U.S. Court of Appeals for the Ninth Circuit.

This won’t be the first time that the ascertainability issue has been before the Ninth Circuit. The court has either ducked the issue in the past or issued unpublished rulings that barely reference it. And because Judge Breyer found numerous problems with Mr. Jones’s proposed class under Federal Rule of Civil Procedure 23, the appeals court could affirm the decision here without addressing ascertainability too. A marked split exists within the federal districts that make up the Ninth Circuit, with opinions ranging from Judge Breyer’s cautious acceptance of ascertainability to other trial judges’ melodramatic rejection of it as a class-action killer. An amicus brief in support of Jones’s Ninth Circuit appeal by Public Citizen and Center for Science in the Public Interest attempts to amplify this “sky is falling” rationale for ignoring ascertainability.

WLF urges the Ninth Circuit in its amicus brief to ignore these alarmist, and specious, policy arguments. Fundamental due process dictates the need for an administratively feasible method to identify allegedly injured consumers. We argue that class action defendants are “entitled to know before trial who is in the class and that the judgment will bind them.” That cannot be achieved by “objectively defining” the class (i.e. “all California residents who purchased Hunt’s Tomato Sauce between the years 2005 and 2010”) and resolving class member identification problems after verdict or settlement, as Jones and his amici suggest.

A feasible method to ascertain class members also protects the plaintiffs‘ due process rights. By “plaintiffs” we mean all the other purportedly injured consumers that the lead plaintiff claims to represent, known in legal parlance as “absent class members.” Those consumers may feel that the coupon or meager financial recovery that a verdict or settlement will provide them is insufficient compensation for their harm. Due process thus requires that they be given the chance to opt out of the class action and pursue their own remedy—something absent class members cannot do if they don’t know whether they are in the class. The non-solution for ascertainability that Jones and his amici propose does not protect those consumers.

The certification of unascertainable classes has demonstrably negative consequences for class members and class actions in general. Stephanie Stroup of Norton Rose Fulbright (and co-author of a 2014 WLF Legal Opinion Letteron ascertainability) described one such consequence in an October 2014 blog post. Ms. Stroup discussed Red Bull’s settlement of a consumer class action in which it agreed to offer a $10 check or a $15 voucher to each person who submitted a claim (no proof of purchase required), with a cap of $13 million. The settlement, and the ease of the claims process, received enormous publicity, and the claims website crashed. Without a doubt, Ms. Stroup explained, there will be claims amounting to “well over the 1.3 million limit that ensures each claimant receives at least $10.” Since no effort was made to ascertain the size of the class, the parties could not anticipate the resulting dilution of class members’ recovery. That dilution could lead to class member opt-outs or objections, either of which could doom the settlement’s judicial approval.

The settlement of actions with unascertainable classes more often results in the opposite of what occurred in the Red Bull case—astonishingly low claims rates on settlement funds. Those settlements offer no value to absent class members and are at a high risk of being judicially rejected. For instance, in throwing out a class action settlement last fall, Seventh Circuit Judge Richard Posner noted that less than one-quarter of one percent of the 4.72 million consumers notified claimed the $3 offered (Pearson v. NBTY). The Chamber of Commerce’s amicus brief in Jones also cites a revealing affidavit filed by a class action claims administrator in the proceedings of a settlement involving Duracell batteries. The affidavit stated that in the company’s experience with consumer class action settlements, those “with little or no direct mail notice will almost always have a claims rate of less than one percent.” Direct mail notice is not possible, of course, in a class where the members cannot feasibly be ascertained.

The debate over ascertainability really boils down to a basic question: why are consumer class actions filed?

If they are filed to efficiently address harms suffered by a large number of consumers, then a requirement that lead plaintiffs and their lawyers offer a method to find those injured persons should be unobjectionable. On the other hand, if lawyers and their hand-picked clients file class actions for personal financial enrichment, and/or to act as private business regulators, then ascertainability is indeed a troubling concept. The larger and more indefinite the class, the more leverage lawyers have to extract large fee awards.

On which side of the line do cases like Jones v. ConAgra fall? Over the last three years, the lead lawyer in Jones has stocked the Food Court and other federal courts with over 100 class action lawsuits similar to Jones. His plaintiff, Mr. Jones, possesses no proof he purchased any Hunt’s tomato products and could not recall in depositions if and when he had done so. No doubt the other members of the Jones class are in a similar situation.

It seems likely that Jones and related food-labeling cases are more money-making vehicles than genuine efforts at consumer protection—just the type of cases where application of ascertainability requirements are needed to protect the rights of defendants and absent class members alike.